Make Sense of the World: Weekly Roundup

Fair Observer's roundup of the week's events. [Note: Click here for the full report.]

The deal with Iran has put downward pressure on oil prices. The country is known to have the world’s fourth largest reserves. Sanctions “cut Iran’s oil sales from 2.5 million barrels per day (bpd) in early 2012 to 1 million bpd.” Now some of this oil will start flowing into the world market. This might be good news for a beleaguered world economy.

North America

In the US, President Barack Obama’s healthcare reforms continue to run into trouble. The deadline of November 30 has passed but the website is still far from ready. The automated part of the enrollment system to pay insurers will not be ready until the spring of 2014. The Obama administration has delayed a crucial part of the law and has given small businesses an extra year to provide their workers with insurance.

The fundamental issue is that the US has an infernally complex healthcare system. Employer-based healthcare is a relic of wage controls during the war years and adds an onerous burden on small businesses. Obama’s reforms will provide more people with insurance and improve the cover for many Americans. However, they do not address the twin problems of cost and complexity. Both of these are likely to exacerbate in an economy where healthcare comprises a ridiculous 17.2% of the GDP, when the average around the world is 9.5%.

The US economy continues to stutter. Unemployment rose for October after falling for the last few months and manufacturing orders declined. Yet, since March 2009, stock markets have been rising with both the Dow Jones Industrial Average and NASDAQ Composite close to record highs. House prices are on the rise too and Bitcoin, a digital currency, has crossed the $1,000 mark. This is worrying. Not only is Bitcoin’s software system under strain, it is yet unclear how governments are going to react to it. New asset bubbles are brewing and the economic risks facing the US are much larger than policy makers acknowledge.

Latin America

The conservative candidate, Juan Orlando Hernandez, has been declared the winner of the Honduran presidential elections. His rival, Xiomara Castro, continues to dispute the result and police are cracking down on his supporters. Hernandez has his work cut out to tackle the opposition, powerful gangs and a poor economy.

Peruvian President Ollanta Humala is facing a scandal pertaining to his links with Óscar López Meneses, who is serving a prison sentence for his involvement in espionage, extortion, and an embezzlement racket run by the intelligence chief of former President Fujimori. Suspicion that Humala, who is a former army officer, is running a parallel intelligence operation for political purposes is undermining his credibility. After years of military rule, Peru and other countries of Latin America are still in the process of establishing checks and balances to curb those in power.

In Brazil, the collapse of a crane at a nearly completed stadium for the 2014 World Cup demonstrates how large-scale corruption has led to increased costs, long delays, and fatal accidents as the country rushes to get projects done in time. Brazil’s government has to figure out how to limit graft if it is to have better infrastructure.

Europe

Angela Merkel’s CDU-CSU bloc might have won 41.5% of the vote and the election, but the SPD seems have won the negotiations. Scarred by its last coalition with Merkel that lasted from 2005 to 2009, the SPD has bargained hard and the 185-page agreement will be a nightmare to implement. Germany will now have a minimum wage of €8.50 per hour. The retirement age will fall from 67 to 63. Nuclear plants will be shut down and investment in infrastructure will fall. The SPD has thrown the 2003 reforms made by its former leader, Gerhard Schröder, out of the window.

Elsewhere in Europe, Standard & Poor's stripped the Netherlands of its triple A credit rating. With France’s credit rating already downgraded, Europe’s economic woes are set to continue.

After years of malfeasance, Silvio Berlusconi, the former Italian prime minister, has finally been expelled from the Senate. He dominated politics for 20 years and ruled Italy like his fiefdom. Now, he might just be convicted for corruption, something that should have occurred years ago if Italy had any rule of law.

Middle East & North Africa

In Libya, Benghazi is back in the news. The country’s new military, which is still in training, is battling Islamist militants and militias that fought the late dictator, Muammar Qaddafi. The power struggle between the government and the rebels will continue.

Egyptian military leaders seem to be determined to roll the clock back to the Hosni Mubarak years. As per a new law, protesters will have to seek approval from police three days before their demonstration. The interior ministry will have the right to block rallies that could "pose a serious threat to security or peace.” The “deep state,” as Egypt’s security establishment is known, seems to be deepening further. An Egyptian court has sent 21 female supporters of Mohammed Morsi, the former president, to prison for 11 years. Seven of these are under 18. In the meantime, crime is surging as the country focuses more on repression than on governance.

Africa

East African nations have announced a monetary union. Borders in Africa have long been arbitrary, cutting across old trade ties and stymieing economic potential. The decision by Kenya, Tanzania, Uganda, Rwanda and Burundi to merge currencies over the next ten years will boost trade and improve their economies. These countries have already created a common market and single customs union. Huge challenges lie ahead but the declaration of a currency union is a most positive development.

Former British Prime Minister Tony Blair’s role in Africa has come under scrutiny. South Africa’s ex-president Thabo Mbeki claims that Blair plotted a military intervention in Zimbabwe and sought his help to get rid of Robert Mugabe, Zimbabwe’s president. Blair denies the charge but his reputation is tarnished further because there is corroborating evidence from Lord Guthrie, the former British chief of defense staff.

Central Asia & South Asia

Afghanistan’s president, Hamid Karzai, is upping the ante in his standoff against the US. He has accused the US of cutting military supplies, including fuel, to put pressure on him to sign the Bilateral Security Arrangement (BSA). Karzai has signaled that he might not sign it until after the spring national elections.

Pakistan has a new army chief. Raheel Sharif takes over from Ashfaq Kayani. Sharif superseded the senior most army officer, Haroon Aslam, who has now retired. This arguably strengthens the hand of Nawaz Sharif, Pakistan’s democratically elected leader. Raheel Sharif takes charge as army chief at a time when Pakistan faces enormous internal challenges, with the Taliban still controlling important parts of the northern tribal areas.

Asia Pacific

In response to China extending its air defense identification zone over tiny islands in the East China Sea, the US sent two B-52 bombers into the area. China responded by scrambling fighter jets. China, Japan and South Korea dispute control over these islands, which are currently under Japanese administrative control.

As India celebrates its Mars mission, China has launched its first rover mission to the moon. The space program is a priority for China’s new leadership and the rover will search for natural resources on the moon. China might be planning exploitation of the moon’s natural resources in addition to its plan to build a working space station by 2020. The US and not just China’s neighbors are bound to feel nervous about its growing ambitions.

In Japan, the ruling Liberal Democratic Party that is neither liberal nor democratic, has used tensions with China to push a draconian law curtailing freedom of information through the lower house of the Diet. The government argues that the law is needed for a new national security council to function. This is nonsense. If the law is passed, government officials could be locked up for ten years and journalists for five for leaking state secrets that will be defined by shadowy bureaucrats in a wide range of ministries and agencies.

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy.

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